A/S SULLIVAN MEETS WITH GERMAN OFFICIALS;

C O N F I D E N T I A L BERLIN 000443

SIPDIS

SIPDIS

STATE FOR EUR/ERA, AGS
USTR FOR DDWOSKIN, SDONNELLY, MMOWREY

E.O. 12958: DECL: 03/04/2017
TAGS: EAGR ETRD PREL GM
SUBJECT: A/S SULLIVAN MEETS WITH GERMAN OFFICIALS;
DISCUSSES MERKEL'S TRANSATLANTIC ECONOMIC PARTERSHIP, DOHA,
IRAN


Classified By: EMIN Robert F. Cekuta for reasons 1.4(b) and (d)


1. (C) Summary: Assistant Secretary for Economic, Energy,
and Business Affairs Dan Sullivan met Jens Weidmann, the
Chancellery's Director General for Economic and Financial
Policy, and Karl Brauner, the Economics Ministry's Director
General for External Economic Policy, February 1-2 to discuss
advancing the WTO Doha talks, Chancellor Merkel's
transatlantic economic initiative, and export credits for to
Iran. German officials expressed determination to move ahead
with Merkel's transatlantic economic initiative and were
encouraged by USG support. They believe a successful
conclusion to Doha is achievable, but think French elections
could limit the EU's ability to give more on market access.
Nonetheless, German officials promised to support Mandelson's
attempt to obtain approval for a better EU agriculture offer.
On Iran, they noted a drop in German exports to Iran and
said Germany maintains strict export controls. Exports of
dual-use items, they said, are closely monitored and do not
receive Hermes credit guarantees. Officials said if Germany
cut off all official export credits, it would disadvantage
German firms vis-a-vis those of other exporting countries,
cause Iran to withhold payments on the amounts now owed
Germany, and, they argued, undercut the growth the middle
class they see as important Iran's movement away from its
current policies. End Summary

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Doha Development Agenda: German Assessments
--------------


2. (C) The German sense is a successful conclusion to the
Doha Round is possible, but they quickly point out the
difficulties May elections in France present when trying to
improve on the EU agricultural offer. Weidmann said
Chancellor Merkel had "very tough talks" with President
Chirac January 31, leaving Weidmann with the sense real
progress, while possible, will require heavy lifting to
Chirac to back down before the French election in May.
Brauner wondered if the U.S. could move things forward by
making an offer that would "embarrass" the EU, shifting
public blame for the lack of progress off the U.S., and
making Mandelson "sweat." Brauner thought an ambitious offer
would divide the EU into two camps -- those who view
agricultural liberalization as an opportunity and those who
oppose it -- and would make the EU reconsider its position.
He said Mandelson takes "a lot of beatings" on his
negotiating mandate and cannot go much further now in terms
of a new offer. That said, a new U.S. agricultural offer
could be the catalyst the Doha negotiations need to address
the important areas of nonagricultral market access and
services. Brauner said the current high prices of commodity
crops, due to biofuel demand and other factors, make it
easier to accept more changes to agricultural offers. He
mentioned the February 11 informal EU trade ministers meeting
in Brussels, where Germany planned to voice its support for
Mandelson and his negotiating mandate.


3. (C) Brauner noted EU business interests have finally
begun pushing hard for a successful conclusion to Doha. He
specifically mentioned that French industry trying to rally
support for Doha by taking a more confrontational stance with
its agricultural sector. German industry, on the other hand,
has shied away from such a strategy, thereby drawing the
public criticism of the German government. However, German
has become more engaged in their efforts to secure a
successful conclusion to Doha.

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Merkel's Transatlantic Economic Initiative
--------------


4. (C) The top economic figure in Merkel's Chancellery, Jens
Weidmann, updated A/S Sullivan on Germany's progress in
advancing the Chancellor's transatlantic economic initiative.
Weidmann stressed the need for political level leadership to
keep the Initiative from falling victim to "trench warfare"
within the bureaucracies. The Assistant Secretary noted he
had confirmed with Deputy National Security Advisor McCormick
that McCormick would be Weidmann's counterpart in advancing
the initiative. Weidmann said Merkel believes shared U.S.
and EU "common values" in the transatlantic economic
relationship reflect areas of U.S.-EU cooperation in the
global economy. Building on these common values can have
global benefits; while the Initiative is not designed to be a


counter to China and other emerging market countries, it is a
way to set out the rules of the international system in which
we want China, India, and others to operate. Brauner said
the Chancellor's goal is to give momentum to an initiative
that goes beyond the Presidency and anchor it institutionally
in the transatlantic relationship. He noted the importance
of having the full support of the EU; Brauner said the
support is there.


5. (C) Examining various options, Weidmann said one proposal
calls for a sectoral approach to regulatory cooperation,
targeting sectors where the benefits are the largest. He
suggested experts could identify the regulatory barriers in
each sector, working within existing or new frameworks to
examine and comment on these barriers. After regulators have
commented, a list of specific regulations in each sector
would be moved, if necessary and appropriate, to the
political level for a decision. He also agreed signing the
Open Skies agreement would be a good deliverable, as people
can "relate" to this agreement. Weidmann promised to talk
with the negotiators and examine the possibilities for
realizing this idea.

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Iran: Sanctions; Export Credits
--------------


6. (C) Regarding Iran, Brauner conceded the subject of
sanctions and limiting export credits is difficult. Brauner
said the number of applications for export credits and volume
of Germany's trade with Iran has dropped considerably over
the past year. He explained export credits give German
companies a certainty to conduct business and are protected
should the economic situation worsen. By having the German
government back the risk, it acts as the insurer where no
private company offers insurance. He noted the export credit
system is government backed, but the premiums collected cover
the cost of the claims. He argued German companies, not the
Iranians, are the beneficiaries. The German government is
hesitant to cap or halt export credits for fear of Iranian
companies defaulting on payments owed. According to Brauner,
Iran has traditionally been a reliable debtor. Responding to
questions, Brauner said export credits cover projects in the
petrochemical industry. He said these projects are not
associated with the military. He said Germany maintains an
active effort to prevent dual-use exports to Iran and that
any such items would not be able to receive Hermes credit
guarantees.


7. (C) Brauner also mentioned reports from German companies
in Iran that Turkish companies have sold General Electric
turbines in Iran, which were then assembled by Chinese
workers. He promised to provide more information on this
alleged sale, as well as ask if similar transactions have
occurred. Embassy is following up with his office to obtain
the promised additional information.


8. (U) Assistant Secretary Sullivan cleared this cable
subsequent to his departure.
KOENIG